Investment Essay Samples and Topic Ideas
investment. However, it is important to note that this is always determined by the market (Dixit & Pindyck, 1995). In this case, the investor is presented with two investment of the same risk which he then chooses one that will award the highest return. One of the approaches used in determining the cost of capital is the subjective approach. This occurs when an investor uses personal opinions and educated guesses in making decision on certain investment. Some of the main advantages of this approach are; companies would not always have the luxury of providing a discount for every available project in an objective manner. Hence, in such situations, a company is more likely to adopt the subjective...
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investment and the type of investment to be selected. WACC can also be used in determining money flow prospect through the application of discount rate. A company may also use WACC as hurdle charge for accessing the possible return of Capital invested by evaluating whether the amount is being used effectively. It is also used in the calculation of the economic value added (EVA) Therefore, when a company has an accurate WACC then it means that the company has the capacity to accurately evaluate its projects. While if a project shows different risk level than the normal operations, then the company WACC should be adjusted to be in line with the project’s risk. In conclusion, the WACC is a bit...
- Words: 275
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investment, which has zero risks. In reality, this cannot hold as there is no investment that has zero risks. Many times, the risk-free rate is used as a benchmark by an investor in decision making. The interest of government bonds are the ones used as the risk-free rate. The bonds are considered to be safer to invest in as the government is unlikely to have insufficient funds to pay back. Beta of the security When an investor wants to make a decision on which stock to go for, then he uses beta (a numerical value) which show him stock that has more risk and highly correlated with the market. Therefore, beta measures how stock prices respond to the stock market. In CAPM beta plays the role of...
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investment. The NPV principle depicts that any organizational undertaking should be accepted if the net present worth is positive as well as declined in the case of a negative NPV. This falls in line with the main aim of wealth creation for the firm shareholders because only projects that increase the wealth are acceptable. On the other hand, managers of different organizations stand to be indifferent to all investments that have zero net present worth. However, this is quite right because such projects neither creates nor builds the shareholders' wealth levels. Additionally, the primary goal of financial management in the company is to provide the criteria for capital distribution in the...
investment that generates long -term income. This stock also provides a fixed dividend that must be shared before any dividend is paid to common shareholders. The main setback for the type of stock is that preferred shareholders do not have same ownership rights in the firm as common shareholders. After getting to understand the two stocks then jack should be in a position to general choose a stock that has dividends. He should also be able to identify the market gap so that he clears know the risk/reward he is to get in that stock. Lastly, he should check with the other investors to see their take on certain stocks so that he can make the right decision. Reference Dann, L. Y. (1981). Common...
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investment with the designs related with 3D+ architecture. The systems are provided by the trade contractors and design firms which are independent in operation. The coordination of the BIM systems into MEP firms involves equipment location and routing of HVAC pipes so as to satisfy the need to avert the various types of constraints that are likely to occur. In the past, MEP coordination was only based on a subsequent and overlaying architectural works, derived from different trades to identify and remove the interference e from the other MEP systems, and this was indeed not economical in terms of time. However, with the inclusion of the BIM, the process is now able to evolve with technology. The...
- Words: 275
- Pages: 1